Your Retirement Savings

And after all the hue and cry about the changes to the CPF system ... what are you going to do about it? Personally, I mean.

A couple of points, if they were not that clear to you previously, ought to have become somewhat clearer by now. Firstly, whether you like it or not, chances are that you WILL live to a ripe old age. Here's some calculations by Tan Kin Lian, done in an ST article on 21 Sep:

"Many people think their chances of reaching 85 are slim. But they are mistaken. I estimate more than 50 per cent of the population will live to age 85 and beyond.

You do not believe me?

The Department of Statistics' publication Population Trends has data for the death rates of each age group over a period of 25 years from 1980 to 2005. Death rates have been falling over this period by about 3 per cent yearly.

I did some projections based on that data, assuming the decline will continue. This is likely to be the case, at least for the next 10 to 20 years. It has been falling at this rate for the past 25 years. Why should it stop now?

Based on my projections, a male at age 55 today has a 57 per cent chance of surviving to age 85, and 32 per cent chance of hitting 95. The probability for a female is higher, at 70 per cent and 42 per cent, respectively.

If you still do not believe me, remember I am referring to people who are 55 years and less today. This group will have a longer life expectancy compared to that of the older people living today."

Secondly, for many Singaporeans, CPF money alone won't be able to sustain them through their retirement. If these Singaporeans also do not have children to support them (adult children being the traditional safety net for the aged, in Asian societies), then the challenge grows greater.

Whatever the government may do now at the policy level, understand that it's pitched at the subsistence level. A monthly annuity payout of $300 is really just to ensure that you'll have enough money to buy your bowl of rice every day with a few sticks of veggies and toufu in it. It's to make sure that when you're old and wrinkled, you don't have to die of starvation on Singapore's nice, clean streets and spoil the scenery for tourists.

So if you want to enjoy your retirement years in much better shape than that, Mr Wang suggests that you spend some time thinking about how to save, invest and grow your money more effectively.

There's no point complaining: "But I only earn $X every month now, and after I pay my utilities bill and my handphone bill and my mortgage and my car instalment and my food expenses and give $Y to my parents, I only have $Z left, I have hardly anything left over to save."

Because, folks, it's your own life. And you know our kind of government is definitely not the kind that's going to give you any free money on a silver platter.

So you have to find a way, that's all.

Me, I drew up my first financial plan for retirement, during my 3rd year of working life. A crude model, no doubt, since I didn't know very much about personal financial planning then, but it got me started.

What about you?

Here's an interesting exercise - think of five ways you could cut down your expenses, without compromising the quality of life that you're accustomed to right now. No, let's make it more interesting - think of five ways you could cut down your expenses, which would either not compromise your current quality of life, OR improve it.

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Retirement, Money and Singaporeans

A Straits Times article, about retirement, savings and Singaporeans' expectations.

ST Aug 11, 2007
Retire? Not so soon, say many
Singaporeans polled
They need to carry on working because of worries
over insufficient savings
By Lydia Lim

SINGAPOREANS are in no hurry to retire and most want to work beyond the official retirement age of 62, some even into their 70s.

It's a case of 'CPF no enough' for many of these workers.

Seven in 10 polled last month in a Straits Times Insight survey on CPF said they do not think their savings in the national pension fund will see them through old age.

Six in 10 of them said the same of their Medisave funds for hospital bills and specified treatments.

The survey of 636 Singapore residents aged 30 and above found that apart from CPF, 77 per cent expect to be able to draw from other sources of retirement income, mainly savings, investments and insurance.

But a significant minority of 23 per cent had nothing else set aside.

One cause for concern is that only one in two Singaporeans has done any financial planning for retirement.

Even fewer, three in 10, have done their sums on how much they need to squirrel away.

What may mitigate against any resulting savings shortfall is their willingness to work beyond the retirement age of 62. Some two-thirds said they plan to do so.

Of these, one-third are willing to work up to age 65, another third up to age 70 and the remaining third into their 70s.

The journalist has got her thinking hat on backwards. The truth can be stated much more simply. It doesn't really matter what the "official" retirement age is. You will go on working as long as you (a) need the money, and (b) are still able to keep working.

Unless you regard suicide as an alternative, you don't have a choice. What were you thinking - that Singapore is a welfare state?

Blue-collar and lower-income workers are the most likely to want to work longer.
Eight in 10 plan to do so, against six in 10 among professionals, managers, executives and business types, or those drawing more than $3,000 a month.

Older Singaporeans are also more likely to want to work past the retirement age than those in their 30s.

The vast majority - 83 per cent - are however against a recent suggestion by ministers to raise the age when they can draw down their CPF minimum sum. It is currently 62.

The only practical significance of the "official" retirement age is that it is also the age when you can start utilising (in tiny little monthly instalments) your CPF minimum sum. For an explanation of how this works, refer to my old post here.

The survey findings also revealed a good amount of ignorance of the workings of the CPF system. Seven in 10 do not know how much they had in their CPF accounts.
And one in two does not know the rate of return on CPF savings.

Of the half who do, most - 63 per cent - are unhappy with the interest rate, which
stands at 2.5 per cent for Ordinary Account savings and 4 per cent for Special and Medisave Account savings.

The top two changes CPF members would like to see are more flexibility in the use of their money, and a higher interest rate on their savings.

Financial experts and Members of Parliament said it is good that Singaporeans feel no false sense of security over their retirement finances.

Manpower Minister Ng Eng Hen emphasised in an e-mail interview that a critical factor in determining what is enough for retirement is how long people work in relation to how long they can expect to live. Average life expectancy has risen from 61 years when CPF was introduced in 1955, to 80 today.

I believe that in the long run, what will catch many people off-guard is how long they end up living. Life expectancies (except in very poor countries) have steadily been rising over many decades and the curves don't seem to show any sign of topping off.

In 1900, life expectancy at birth in the United States was only 47 years. By year 2000, it had climbed to 77 years (an increase of 30 years). In 1950, life expectancy in China was 35 years. By 2000, it had risen to 71 years.

If you google around to check out what the scientists and doctors have to say about new medical discoveries and research and their implications for how long people are going to live, well, you'd probably be quite startled. Anti-aging medicine has become an industry in itself.

The question is - how long can you afford it? Not the medicine. I mean - life itself. Living 10, 20 years longer than you expected means that you need money to support yourself for an additional 10, 20 years. That's a pretty long time.
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What Madonna Can Teach Singapore

When I first heard Madonna's songs, I was in primary school. Now I'm a father with two kids. And Madonna is still going strong. Looking at the picture on the left, it's hard to believe that she will soon be 50 years old.

Singaporeans are talking about Madonna again because she just got banned here. Ironically, Madonna probably does not care. She may not even know. She's the highest earning female singer of all time. Last year her concert tour sold out in Europe, Japan, the US and Canada and grossed US$260 million. Conquering a little red dot like Singapore can't be high on her list of commercial priorities.

Although Madonna does not need Singapore, I daresay that in some ways, Singapore needs Madonna. You may or may not like her music. But her life story holds, in many different ways, the lessons that Singapore, and Singaporeans, need to learn. I'll just highlight five:

Madonna as the Outstanding All-Round Student

Many young Singaporeans study too hard. They may have a passion for non-scholastic pursuits, but they don't know how to achieve the balance. Consequently, all-rounded Singaporeans are rare. Instead we often meet parents who have barred their children from taking part in sports or cultural activities, so that they can spend more time studying.

In her teenage years, Madonna spent a lot of time on ballet lessons. She even hung out at gay discotheques with her ballet teacher. But she was no dumb blonde. Despite all the time she spent on dance, she was a straight-A student in high school. In fact, she did so well that she won a scholarship to enter a top US university - the University of Michigan.

The University of Michigan counts 25 Rhodes scholars and seven Nobel Prize winners among its alumni. It's currently ranked the 11th best university in the world. That's 25 places above NUS, and 60 places above NTU.

Madonna and the Courage to Take Risks

In recent years, the Singapore government has been saying that Singaporeans are too risk-adverse. We stick too closely to the standard paths. We place too much faith in paper qualifications. We define success too narrowly. We need risk-takers, we need dreamers, we need people who dare to veer off the trodden paths.

Like Madonna. Having entered a top university on a scholarship, she proceeded to do the Bill Gates thing. She quit without graduating. Like Bill Gates, she had a dream and she was going to pursue it. She would go to New York City and become a top professional dancer. She describes the pursuit of her dream here:

"When I came to New York it was the first time I'd ever taken a plane, the first time I'd ever gotten a taxi-cab, the first time for everything. And I came here with 35 dollars in my pocket. It was the bravest thing I'd ever done."

35 dollars was all she had then. She took a risk. Today, her personal net worth is estimated at USD 325,000,000.

Madonna as Entrepreneur

Singapore wants entrepreneurs. Singapore needs entrepreneurs. Singapore has been desperately trying to breed entrepreneurs, but after all these years, Singapore is still down to the same few poster boys & girls of entrepreneurship - Ron Sim of OSIM, Olivia Lum of Hyflux, Sim Wong Hoo of Creative Technology.

Madonna is also an entrepreneur. Her product is herself. She is well-known to be a very serious businesswoman. In fact, the very staid, very serious financial magazine Forbes once suggested on its front cover that Madonna was "America's Smartest Business Woman".

And guess what? With a net worth of USD 325 million, Madonna is richer than Ron Sim. She is richer than Olivia Lum. She is richer than Sim Wong Hoo. The next time Singapore wants a new model example on how to get rich via entrepreneurship, we should study Madonna's business strategies. Singapore wants its companies to go global, but Madonna was already a global brand 20 years ago.

Madonna As The Almost-Senior Citizen

Approaching their 50s, most Singaporeans start dreaming about collecting their CPF money and enjoying their sedate retirement years. Many Singaporeans were aghast by the government's decision to raise the official retirement age to 62. This is despite the fact that many Singaporeans will probably not have enough money to support themselves comfortably in their old age.

Madonna obviously does not need more money. Furthermore she is almost 50. But she shows no sign of stopping. She doesn't even show any sign of slowing down. This year, she'll be making a new movie. Last year, she did her sell-out concert tour around the world. Reports say that she worked on her dance routines 13 hours a day. This is the same woman who sustained three cracked ribs, a broken collarbone, and a broken hand, in a horseback riding accident as recently as August 2005.

If Singapore's rapidly ageing population needs some inspiration on how to live life with more enthusiasm, Madonna could be their role model.

Madonna & Free Speech

Singapore has a poor reputation for free speech. Many Singaporeans are afraid to speak up. As recently as last Saturday, Dr Cherian George and I were at an NUS seminar trying to convince the audience that such fears are largely groundless, that Singaporeans can speak up openly. Alas, later that day, I learned that even members of the ruling political party have adopted a strategy of making anonymous postings on the Internet.

Madonna has much more testicular fortitude (to steal a phrase from Cherian). She's not afraid to push the borders in her music. Throughout her career, she has repeatedly used political, sexual and religious themes and imagery in her work. The only time she ever really backed down was in relation to her ninth album, American Life. The video for the single was filmed in the run up to the second Iraq War, and its content was deemed "unpatriotic" by early reports. She withdrew the video, saying:

"I have decided not to release my new video. It was filmed before the war started and I do not believe it is appropriate to air it at this time. Due to the volatile state of the world and out of sensitivity and respect to the armed forces, who I support and pray for, I do not want to risk offending anyone who might misinterpret the meaning of this video."

The album did badly in the US but according to Wikipedia, did better in countries which did not support the Iraq war. In France, the album reached No. 1 and sold more than 500,000 copies. One major reason for her great success in France was the large anti-war community and their pleasure at seeing an American artist that opposed the 2003 Invasion of Iraq.

Wikipedia tells us that Madonna does not support US President George Bush. She endorsed Wesley Clark's Democratic nomination for the 2004 United States presidential election, in an impassioned letter to her fans, saying that "the future I wish for my children is at risk." In the autumn of 2006, she expressed her support for Hillary Clinton in the 2008 election. She also urged her fans to see Michael Moore's movie, Fahrenheit 9/11. She is a person who is unafraid to speak up for her political beliefs.

Today, Singapore has banned Madonna. The grounds are that her latest Confession performances contain scenes that are religiously impermissible in Singapore. The decision could be right. Madonna has a lot to teach Singapore - but perhaps we're just not ready.

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